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Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to $50,000; variable costs were $100,000. How much cost would the company anticipate if during the next period it produced and sold 102,000 units?

A. $150,000.
B. $151,000.
C. $152,000.
D. $153,000.
E. Some other amount not listed above.

User Deicy
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1 Answer

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Final answer:

Douglas Corporation's anticipated cost for producing and selling 102,000 units is $152,000. This includes the fixed cost of $50,000 and the variable costs of $100,000 for the first 100,000 units plus an additional $2,000 for the extra 2,000 units.

Step-by-step explanation:

In assessing how much cost Douglas Corporation would anticipate if it produced and sold 102,000 units after having produced and sold 100,000 units with $50,000 fixed costs and $100,000 variable costs, one must understand the behavior of fixed and variable costs. At zero production, fixed costs are still incurred, and they remain constant regardless of the level of production. On the other hand, variable costs vary with production level. Since the fixed costs will stay the same, we need only calculate the additional variable costs for the extra 2,000 units.

Given the information, we can compute the variable cost per unit by dividing the total variable costs by the total number of units produced, which is $100,000 รท 100,000 = $1 per unit. To anticipate the cost for 102,000 units, the fixed costs of $50,000 will remain the same, and the variable costs will increase by $1 per additional unit for the 2,000 extra units, resulting in an additional cost of $2,000. Therefore, the total anticipated cost will be $50,000 (fixed) + $100,000 (variable) + $2,000 (additional variable) = $152,000.

User Thiha Zaw
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